How to apply archery to planning your retirement income

Getting started

Preparing for your retirement starts, literally, decades before your 60^th or 65^th birthday, the age at which many companies, almost automatically, terminate your employment. Your retirement journey starts with the pot of retirement savings that you have accumulated either in your employer pension fund or retirement annuity or, ideally, in a combination of both. These savings, arguably, form the most important arrow in your quiver to sustain you financially during your retirement. The significance of the amount that you save cannot be over-stated.

Know your number

If you were wondering how much you need to save, calculate this using your net replacement ratio (NRR) – the percentage of the current annual income in your last years of employment. Financial experts estimate that in order for you to maintain the lifestyle that you are able to have, the percentage is upwards of 75% per annum. Knowing your NRR and understanding the living costs that you will need to provide for when you retire, is a critical step.

What’s in your control and what’s not?

There are quite a few things to consider when you’re planning your retirement income – the external and environmental factors, if you will. They are, among others:

1. How long you are likely to live (called longevity risk). It’s sensible to plan for living beyond the age of 80 – most people do nowadays. Unless you have a terminal illness, the possibility is high that you will live a long life, even with chronic conditions like diabetes.
2. The market conditions that prevail at the time of your retirement and during the years that you will need to draw a retirement income. There will be good market cycles and not-so-good ones. Some of the investments that you make with the intention to provide you with an income over your retirement, will be impacted by the markets, while others, less so. It would be prudent to have an investment portfolio that combines solutions that benefit from up-market cycles and protect your capital in times of volatility.
3. Know your risks and liabilities. While factors like your current debts (your mortgage bond, for example) might be settled by the time you retire, you need to consider other factors, like increasing medical costs when you’re older, or the fact that you might still have financial dependants.
4. How much you plan to draw as an income is also a key consideration. It’s really simple: if the percentage that you withdraw is too high (known as your drawdown rate), your investment will diminish too quickly, and you will run out of money.
5. Investing doesn’t stop when you retire. While capital protection may be important to you, growing your investment is also critical, which means taking on an acceptable level of investment risk, catering for income and inflationary considerations.

Employ the services of a financial planner

Even the most skilled archer relies on a coach to refine their technique, correct their aim, and help them adjust for changing conditions. In the same way, an appropriately authorised financial planner can help guide you through the complexities of planning your retirement income.

A financial planner will help you design a holistic strategy that aligns with your personal circumstances, risk tolerance and goals. They can assist you in selecting the most suitable retirement savings and income products ensuring your arrows are well chosen, balanced, and aimed squarely at your long-term financial security.

Often, this strategy involves a blend of solutions that:

• Provide flexibility in the early years of retirement.
• Introduce income certainty as you age.
• Balance risk, control, and security in line with your evolving needs.

As market conditions, longevity expectations and personal circumstances change, your planner helps you adjust your aim to ensure your financial strategy remains on target. Like any good archer, the key is preparation, precision, and knowing when to seek expert guidance. DM

Unlock infinite retirement opportunity.

Glacier Financial Solutions (Pty) Ltd is a licensed financial services provider.

Sanlam Life Insurance Ltd is a licensed life insurer, financial services and registered credit provider (NCRCP43).